PREVIEW-Japan recovery seen intact despite likely June output fall
* June industrial output forecast -1.8 pct m/m
* Economists say fall due to temporary adjustment by automakers
* Consumer spending, labour demand going strong in Japan
* Japan goverment making ambitious bid to end deflation
TOKYO, July 26 (Reuters) - Japan's industrial production likely fell in June for the first time in five months as automakers curbed production to avoid an excessive increase in inventories, but this decline is likely to be temporary as exports to the United States remain strong.
Retail sales in June likely rose at the fastest pace in a year, while household spending in June is expected to recover from a dip in the previous month, a Reuters survey showed, as warm weather boosted spending on seasonal goods and leisure.
Japan's labour market is expected to improve further due partly to public works spending and a housing boom, suggesting domestic demand could offset worries that China's slowing economy will hurt export demand.
"The decline in factory output will be temporary," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.
"U.S.-bound exports are doing well. Japan's domestic economy is also strong. Things are going well and the economy can continue to expand for the time being."
After taking office in December, Prime Minister Shinzo Abe unleashed an aggressive policy mix of monetary and fiscal stimulus to end 15 years of deflation, and first-quarter data showed Japan was the fastest growing major economy in the world.
A boom in residential property sales and signs that an increase in luxury goods purchases earlier this year is spreading to other consumption have raised hopes that Japan's economy can continue to grow without relying excessively on exports.
Industrial production in June is forecast to have fallen 1.8 percent, which would mark the first decline in five months. The data are due next week.
In recent months, Japanese automakers had rapidly increased production to meet U.S. demand, but carmakers are likely to temporarily lower production to make sure unsold vehicles do not pile up, according to Miyagawa.
The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) for July is also due next week. No forecasts are available. In June the index expanded at its fastest pace in more than two years.
Retail sales likely rose 1.9 percent in June from a year ago, the poll showed. That would be the fastest increase since a 3.0 percent annual rise in May 2012 as shoppers bought summer clothes and spent more on entertainment amid improving consumer sentiment.
Wage earners' household spending, a separate measure of consumption, is forecast to have risen an annual 1.0 percent in June, reversing a 1.6 percent decline in the year to May.
The jobs-to-applicants ratio is expected to rise to 0.91 in June from 0.90 in the previous month. This would mean labour demand is at its strongest in five years.
Japan's jobless rate is forecast to hit a 4-1/2 year low of 4.0 percent, due to growing employment in healthcare and other services.
Housing starts in June are also forecast to surge 15.8 percent from a year ago, which would be the fastest increase since October 2012.
(Editing by Simon Cameron-Moore)